DCP Technical Evaluation Flashcards
MLA––What is MAPR?
Military annual percentage rate
MLA––What is MAPR limit?
36%
MLA essentially replaced what regulation?
Talent amendment
MLA applies to what types of transactions?
Consumer Credit transactions on or after October 3, 2016. Credit primarily for personal, family, or household purposes that is 1) subject to finance charge and 2) payable by a written agreement in more than four installments.
MLA applies to credit extended to whom?
Certain consumer credit extended to active duty service members and their spouses, children, and certain other dependents (“covered borrowers.”). Dependent refers to covered member’s spouse; children under 21; children under 23 enrolled full time at institute of higher learning; any children incapable of self–support due to mental or physical incapacity.
MLA does NOT apply to what Reg Z transactions?
Residential mortgages; credit transactions to finance a motor vehicle purchase when credit is secured by the motor vehicle being purchased; credit to finance person property purchase when credit is secured by property being purchased.
MLA when is a Covered Borrower excluded?
when credit transaction or account relating to a consumer who is not a covered borrower at time he/she becomes obligated on a credit transaction or establishes an account for credit
MLA Creditor?
Engaged in the business of extending consumer credit; or an assignee of a person engaged in the business of extending consumer credit with respect to any consumer credit extended.
MLA terms for consumer credit extended to covered borrowers?
Creditor may not impose MAPR greater than 36% in connection with an extension of consumer credit that is closed–end or in any billing cycle for open–end credit. Includes credit cards after 10–3–17. Charges must include credit insurance premiums, fees, except for bona fide fee which may be excluded if bona fide fee is resaonble.
MLA Safe harbor for creditors?
Creditor may use its own method to assess whether a consumer is a covered borrower, but there is optional safe harbor if verify status of consumer using DOD database search or verify status using statement, code, or indicator of status in consumer reporting agency report. Must maintain record of information within 30 days prior to credit or consumer responds within 60 days of offer
MLA––mandatory loan disclosures?
Before borrower is obligated: \nstatement of MAPR applicable \nany Reg Z disclosure required provided only in accordance with Reg Z\n*clear description of payment obligation of covered borrower.\nIf multiple creditors only one must provide MAPR statement
MLA Rollovers to borrowers?
Unlawful for creditor to roll over, renew, repay, refinance, or consolidate any consumer credit to covered borrower by same creditor with proceeds of other consumer credit extended by that creditor to the same covered borrower.
MLA––dispute resolution terms?
Creditor cannot require a covered borrower to waive right to legal recourse; submit to arbitration; or give unreasonable notice as a condition for legal action.
MLA––Prohibited payment terms and conditions?
creditor cannot use vehicle title as security of the obligation involving consumer credit; require that borrower establish an allotment to repay obligation; prohibit prepayment.
MLA––Creditor’s access to borrower’s account?
Cannot use check or other method to access a borrower’s account, but can require EFT to repay consumer credit transaction; require direct deposit of salary as condition for credit, and can take security interest in funds deposited after extension of credit in account established in connection with consumer credit transaction.
When is restitution required for TILA?
Understated APR or Finance Charge. FDIC may order adjustment unless exemption applies.
TIL Restitution required if understatement is result of?
1) Clear and consistent pattern or practice of violations;\n2) Gross neglect;\n3) willful violations intended to mislead consumer
TILA––Relief from restitution?
Little discretion for relief. Director may delegate authority to Regional Director, but only to deny requests if restitution totals less than $25,000.
TIL Error––4 instances when FDIC can waive restitution?
1) Fee or charge otherwise excludable\n2) Error 10% or less and APR or finance charge disclosed correctly\n3) Error involved total failure to disclose APR or FC\n4) (Frequently cited and hard to meet) unique circumstances, technical and nonsubstantive, don’t adversely affect info provide to consumer, AND haven’t misled or otherwise deceived consumer.
TILA––bank will usually have no civil or regulatory liability if it takes what action on discovering understated APR or FC?
Before civil action or written notice of error, within 60 days of discovering error: 1) notify consumer; 2) provide restitution for overcharges. MUST provide restitution
TILA––requesting relief from restitution––timeframe?
Within 60 days of receipt of exam report containing request to conduct file search & make restitution to customers. Request to regional director––corrective action not required till decision made.
TILA––Pattern or practice/violation that is reimbursable when is it a pattern or practice?
1) Frequency at least 10% fo credit transactions sampled AND\n2) two or more violations of same type identified. Should expand sample to verify. Review additional files.
TILA––# of violations for pattern or practice?
10% of sample. 2 if sample is 25 or below.\n6 if sample is 55
CRA––a bank that offers only a narrow product line to regional or broader market?
APproved by regulator? Limited purpose bank––e.g. credit card bank. Can’t be bank offering small business, small farm, or home mortgage.
CRA––A bank that is not in the business of extending loans to retail customers?
Wholesale bank
CRA––Process for bank being designated wholesale?
Bank requests designation at least three months prior to effective date.\nMust receive designation before being subject to CD test\n*Designation effective until bank requests revocation or until one year after FDIC notification of revocation
CRA––Qualified CD activities benefitting parties outside of AA are considered for wholesale/ltd purpose banks?
True, if bank has met credit needs of its AA
CRA Strategic plan bank––FDIC assess under plan if. . .?
Bank submit plan, FDIC improved; plan in effect; bank operating under plan for at least 1 year.\n5 year term; must have annual interim goals. Lending, investment, and service focus. Required Sat. and outstanding goals.
CRA––if strategic plan bank doesn’t meet Satisfactory goals of plan?
IF it is put in (written) plan, may be examines alternatively as whatever size bank it would have been examined as without strategic plan.
CRA––Strategic plan bank––public comment?
Formal public comment for at least 30 days. Copies available at all branches.\nFinal plan to FDIC 90 days prior to effective date.\nFDIC will act within 60 days of receipt of proposed plan unless good cause to delay.
CRA Record of performance considered for. . .?
- New Branch\nBranch relocation\n Merger, consolidation, or acquisition\n*Deposit insurance for newly–chartered FI
CRA––ISB––rating if Needs To Improve on one test?
If NTI on one test, bank cannot be satisfactory. Must be Needs to Improve.
CRA––ISB––HMDA Reporters?
ISBs not required to collect or report CRA data. \nISBs NOT required to report geographic data for HMDA loans OUTSIDE MSA/MD Where bank has main office, branches.\n*ISBs that want to be examined as a large bank must collect and report CRA loan data.
CRA Small and ISB banks want to be examined as large banks?
Must collect and report CRA loan data.
CRA––large bank examination, data collection?
Must have one full year of data collected to be examined as a large bank (after turning large bank, from ISB)
CRA––Call report lines for Small business/small farm?
Small business––1e and 4.\nSmall farm––1b and 3
CRA Large Bank loan amounts––for small farm/business loans?
Small business loan: Original loan amount $1 million or less.\nSmall farm loan: original loan amount $500K or less. \n*Reporting original amount of loan, not revenue of business/farm.
CRA––CD Loans for large banks?
Reported in aggregate. 1 line of XX loans and XX dollars.
CRA––if large bank purchases loans?
Bank collects and reports amount of loan at origination (not purchase).\n\n\nFor CRA––evaluate based on purchase amount and only get amount of purchase
CRA––large bank HMDA requirements or being examined as large bank?
Must report other information––geographic location of HMDA loan (not required for all ISB loans)
CRA––other lines large banks can collect (not report)?
Motor vehicle\ncredit card, Home Equity\n*other consumer loans\n\nBut don’t review in CRA PE unless these lines are a substantial majority of loans for bank.
CRA––large bank lending test? Investment test? CD Services?
Lending––Innovative and flexible lending practices\nInvestments–innovative and complexity of qualified investments\nServices––innovativeness and responsiveness of cd services.
CRA test––wholesale and limited purpose banks?
Solely based on Community Development test
CRA––CD Services?
Has CD as primary purpose\nRelated to provision of financial services\n\n\ne.g., on BOD of affordable housing org; homebuyer seminars for LMI; Loan related technical assistance to SBA services in employees’ area of expertise.
CRA––CD qualified investment vehicles?
grants/donations\ninvestment in mortgage backed securities targeted to LMI\nDeposit in membership CDFI\nDeposit in Women/Minority owned FI (MWLI)\nEquity investment in small business venture capital\ninvestment/grant to CDC\nInvestment in bond with CD primary purpose\ninvestment in CRA mutual fund targeted to bank’s AA
CRA––Investment $$ credit?
New investment––get credit for $$ amount\nPrior period? Get credit for book value.\n*If large amount of unfunded commitment, can make a note of it.
CRA––ISB CD activities??
Innovativeness and complexity NOT REQUIRED for ISB, but can add in and consider
CRA––CD for small bank?
Evaluated at bank’s request. Not required.
CRA––CD lending for ISBs?
non HMDA ISB may have affordable home mortgage loans considered for CD\nISB may have small business/farm loans considered CD loans if they meet the definition.\n*only multi–family dwelling loans may be considered in both lending/CD
CRA––CD lending quantitative performance number?
CD lending/net loans %\nCD performance relative to net loans
CRA––CD Investment performance measures?
CD Investments/Total Assets\nInvestments include securities, interest bearing bank balance, Federal funds sold, trading account assets.
CRA––CD Services––Retail banking services?
Retail banking services considered if benefit LMI––e.g., IDAs, remittances, low cost accounts, etc.
CRA––CD services––would branches in LMI areas be considered a CD service?
YES––LMI branches are included. Also ATM facilities that are deposit taking.
CRA––Consumer loan reporting?
No data reporting requirements for consumer loans. May collect information (optional). Motor vehicle, credit card, home equity [to be reported under HMDA after 2018]; other secured, other unsecured loans.
CRA––if only part of a loan is for CD affordable housing, how much credit does Bank get in test??
? If stated primary purpose is community development, such as affordable housing, then 100% of loan is counted. if not primary purpose, pro rata share is counted (e.g.., 40% affordable housing.)
CRA Business loans––how to determine if Gross Annual Revenues of $1 million or less?
Use revenues bank considered in making credit decision. \nStart up businesses GAR? $0 or actual GAR to date.
CRA data reporting? Who must report?
All banks except small institutions.\nmust report by March 1 for previous calendar year.
CRA––Reporting data on lines of credit and renewals?
Must collect and report lines of credit as with originations (increases and renewals)\nLOC when approved or increased.\nIncrease considered NEW origination. Amount of increase is reported.\nDon’t report if increase takes line over $1M or $500K (farm)
CRA––factors considered in determining if bank has excluded LMI arbitrarily?
Consider on a case by case basis. Consider:\nincome levels in AA and surrounding geographies.\nlocation of branches and deposit taking ATMs\ndistribution of loans\nbanks size\nbank’s financial condition\nbusiness strategy
CRA––may AA extend beyond MSA or state boundary?
NO––may not go across state boundaries unless AA is located in multistate or MSA.
CRA––what are political subdivisions?
Cities, towns, countries, townships, indian reservations, census tracts.
CRA––AA delineated for specific group?
May delineate AA for customer base such as military personnel. May not delineate for any ethnic group.
CRA––AA Boundaries?
Must include whole geographic (census tracts) and generally should include entire political subdivisions.\nAdjustment of boundaries if AA too large to serve––by highway, river, mountain. \n*May not exclude LMI arbitrarily.
Large bank points for CRA rating?
Must have at least a Low Sat in lending for overall Sat.
CRA––CD services––branches?
Branches in LMI geographies help demonstrate availability of banking services to LMI individuals.
CRA––strategic plan––public notice?
Solicit public comment for 30 days after publishing notice in newspaper at least once.
CRA––strategic plan goals?
annual measurable goals must be stated with specificity to permit public and agencies qualify performance expectations
CRA Innovative performance criterion?
Augment performance. Lack of innovativeness does not make Need to improve rating.\nApplies only to lending, investment, and service test of large institutions.\n*Community development test part of wholesale/limited purpose banks.
CRA Small bank test––will investments be considered?
Only lending–related qualified investments will be considered for determining whether small bank receives SAT rating performance standard focuses on lending.
CRA––what is reasonable Loan to Deposit ratio for small bank?
No specific ratio is reasonable. must consider bank’s performance context––including capacity to lend, demographics, economic factors. . ..
CRA––ISB Community Development test applications?
Combination of CD loans, investments, and services––that are responsive to needs of community and consistent with capacity of financial institution.
CRA Service test––Retail banking services that improve access to financial services? (large bank)
low cost deposit accounts\nelectronic benefit accounts and POS\nIndividual development accounts\nFree or low cost gov’t payroll or check cashing\n*reasonably priced remittance services
CRA––Services performed by affiliates?
Will consider services of affiliate or that party to help meet credit needs.\nMay be considered if not claimed by other financial institution.\ne.g., FI that contracts with nonprofit to provide LMI counseling for homeowners.
CRA––Wholesale/LTD purpose bank CD test?
may consider nationwide if adequately addressed needs of AA, broader statewide, regional area\nMay perform well in one or more activity categories (lending, service, investment0 to perform well
CRA––Affiliate CD loans and services for small banks?
Will consider if not claimed by another bank;\nAffiliate loans NOT considered in calculating loans inside AA;\n*Bank must maintain records and provide information
CRA––Wholesale bank vs. Limited purpose?
Wholesale bank has no consumer lending.
5 types of CRA Exams?
Small;\nISB;\nLarge;\nCD (Wholesale/limited purpose––just focus on community development);\n*Strategic Bank
Are there civil/criminal liabilities for CRA?
No
ISB Threshold?
Assets of at least 313 M as of both prior 2 years, and less than 1.252 B either of prior
Large bank threshold?
1.252B both of 2 prior calendar years
Small bank threshhold?
over $313M for both of prior two years
Do holding company assets count towards CRA size for banks?
No
CRA Performance Criteria for small bank?
1) Loan to deposit;\n2) AA concentration\n3) Borrower distribution (income/revenue)\n4) Geographic distribution\n5) Response to written complaints.\nInvestments/services are optional. Adjust for illegal credit practices.
CRA ISB Performance Criteria?
1) small bank test PLUS\n2) CD Test––# and amount of CD loans/investments; extent of cd services; responsiveness to CD needs
Large Bank CRA test?
Lending\nInvestment\n*Service
CRA Ratings?
Outstanding;\nSatisfactory;\nNeeds to Improve\nSubstantial Noncompliance
Law that mandates CRA Exam frequency?
GLB––Gramm Leach Bliley
CRA Exam Frequency for banks under $250M in assets?
If outstanding or Satisfactory, every 5–6 years.\nNeeds to Improve=1–2 years\n*substantial noncompliance=1 year\n\n\nExam timing depends on size and previous rating.
CRA Exam Frequency for banks over $250M?
Outstanding/satisfactory=every 2–3 years\nNeeds to Improve=1–2 years\nSubstantial noncompliance=1 year\n\n\nExam timing depends on size and previous rating.
CRA Census tracts?
Smallest CRA geographical designation.\nDo not cross county boundaries\nPopulation 1200–8000, usually. Optimal 4000\nnormally follow visible features.
CRA MSA––Metropolitan Statistical Area?
Area with at least one urbanized area with population at least 50,000.\nMSA––Central county/counties containing urban area plus adjacent county having high degree of social/economic integration.
CRA Metropolitan Division (MD)?
Subdivision of larger MSAs that function as distinct social, economic, and cultural area\n31 MDs in 11 largest MSAs. MDs smaller than MSA
CRA––multistate MSA?
MSA with boundaries overlapping at least two different states.
Non–MSA?
not in MSA––99999
CRA Micropolitan Statistical Area
Similar to MSA but smaller population base. As least one urban cluster between 10,000 to 50,000. Considered Non–MSA for CRA
CRA––CSA––Combined Statistical Area?
Adjacent MSA and Micropolitan Statistical area\nlargest geographical designation for CRA\n*Currently 169 CSAs in Country
CRA––AA requirements?
- Must consist of MSA or MD or one or more contiguous political subdivisions\n2. Must include geographies where bank has office, branch, or deposit taking (remote)\n3. Must include surrounding geographies in which originated or purchased substantial portion of loans.\n\n\n#3 not applicable for wholesale/ltd purpose
Wholesale/limited purpose AA?
Usually one location where bank has office, branch, etc.\n\n\nDoes NOT include surrounding geographies where bank has originated or purchased substantial portion of loans.
CRA adjustments of geographical AA?
Bank can adjust and include portion of subdivision bank can reasonably serve (ideally, whole counties). e.g., towns around branch.
CRA––AA delineation limitations?
Must consist of whole geographies\nmay not reflect illegal discrimination\nmay not arbitrarily exclude LMI\nMay not substantially cross boundaries unless multistate MSA.
CRA––LPO (loan production office) as AA?
NO. LPOs are not branches and banks should not delineate separate AA for only LPO.
Examiner adjustments to CRA delineated AA?
Use bank’s AA unless it does not comply with regulation (e.g., arbitrarily excludes LMI areas)\nBased on discussion with managment, develop a revised AA that complies\n*Use this AA to evaluate bank’s performance
CRA––banks serving military personnel AA?
Banks may delineate entire customer base as AA if business predominantly serves military personnel or dependents not in defined geographical area.
How can sole LPO be designated as an AA?
Establish deposit–taking RSF (Remote Service Facility) ATM
Affiliate Lending CRA AA?
Determine AA by own branches, etc. Geographies in which affiliate lends do not affect AA.\nCan consider single category if consider all\n*do NOT include affiliate loans already included for another bank.
CMS––what are ratings principles for exam?
Risk–Based (size, complexity, and risk profile)\nTransparent (Distinct ratings categories; reflect scope of review)\nActionable (Effectiveness of CMS)\nIncent Compliance (Self–Identification and correctiosn)
What are ratings descriptors for exam CMS?
Strong, adequate, and weak
Compliance Exam Rating based on what?
12 Assessment Factors:\nCMS Elements (4 elements BOD/MGMT oversight, 4 elements Compliance program)\nViolations of Law and Consumer Harm (4 factors––NOT a CMS Element)\nBoth BOD/Mgmt oversight and Compliance program extend to third party relationships.
Oversight factors should be evaluated commensurate with. . .?
Bank’s size, complexity, and risk profile.
What are 4 assessment factors for board/mgmt oversight?
Oversight and Commitment;\nChange Management;\nComprehension, Identification, and Management of Risk;\nCorrective Action and Self–Identification
BOD Oversight and Commitment assessment?
Commitment to and oversight of CMS\nLevel of resources dedicated towards compliance functions\n*Due diligence and oversight of third parties
BOD Change Management assessment?
Anticipation and responsiveness to changes\n*Due diligence reviews performed in advance of changes and after implementation.
BOD Comprehension, Identification and Management of Risk assessment?
Comprehension and identification of compliance risks, including emerging risks\nManagement of identified risks, including self–assessments
BOD Corrective Action and Self–Identification Assessment?
*Identification and responsiveness to compliance risk management deficiencies and violations of law or regulations, including remediation.
Compliance Program Assessment Factors to be considered for exam (Evaluated commensurate with bank’s size, complexity, and risk profile. Extends to third–party relationships)?
Policies and Procedures\nTraining\nMonitoring and/or Audit\nConsumer Complaint Response
Compliance Program Policies and Procedures adequacy?
Appropriate and includes all products and services\nUp–to–date and includes regulatory requirements
Compliance Program Training adequacy?
Comprehensive\nCurrent\n*Tailored to risk and staff responsibilities
Compliance Program Monitoring/Audit adequacy?
Monitoring practices\nManagement Information Systems\nReporting\nInternal Controls System\n*Compliance audits
Compliance Program Consumer Complaint Response adequacy?
Policies and procedures\nMonitoring program\n*Investigation and response
Violations of Law and Consumer Harm Assessment Factors?
Root Cause\nSeverity\nDuration\nPervasiveness\n(Not CMS element)
Root Cause of Violations of Law and Consumer Harm?
Analyzes the degree to which weaknesses in the CMS gave rise to the violations\nIn many instances, tied to a weakness in one or more elements of the CMS
Severity Cause of Violations of Law and Consumer Harm?
Weighs the type of consumer harm, if any, that resulted from violations of law\nMore severe harm results in a higher level of supervisory concern under this factor
Duration Cause of Violations of Law and Consumer Harm?
Considers the length of time over which the violations occurred\nViolations persisting over an extended period of time raise greater supervisory concerns than those occurring for a brief period of time.
Pervasiveness Cause of Violations of Law and Consumer Harm?
Evaluates the extent of the violations and resulting consumer harm, if any\nViolations affecting a large number of consumers raise greater supervisory concern than those impacting few consumers.
Violations of Law and Consumer Harm–4 and 5 rated banks
Severity, Duration, and Pervasiveness are the same. Same level of consumer harm.
Element Descriptors must be defined as one of three ways:
STRONG\nADEQUATE\nWEAK
How many violations will be required to make a program weak?
It depends. Maybe none. Under Pervasiveness, it states that the “Violations and resulting consumer harm, if any, are numerous.” Rating not dependent on violations.
What are the Consumer Compliance rating definitions for ratings 1–5?
1: Strong CMS\n2: Satisfactory CMS\n3: Deficient CMS\n4: Seriously Deficient CMS\n5: Critically Deficient CMS
How does self–identification of violations of law and Consumer Harm effect exam rating?
Reflects strength in bank’s CMS and rating system provides incentives for proactive self–identification and prompt corrective action.
What is FIAP?
Formal and Informal Action Procedures. Section 8 of the Federal Deposit Insurance Act, to issue enforcement actions.
What is difference between formal and informal enforcement actions?
Informal are not public.
What are two types of enforcement actions?
Board resolution and MOU (Memorandum of Understanding). Board resolutions not used often––Bank decides what corrective action is to be taken, and submits to FDIC. Informal commitments developed by bank’s BOD, directing personnel to take corrective action. MOU is informal agreement between FDIC and Bank, developed by FDIC based on recommendations of exam findings.
What are formal enforcement actions against a bank under FDIC’s section 8 of FDI Act?
8 (a)Suspension or termination of deposit insurance; 8(b) Cease–and–Desist Order; 8(b) \nConsent Order; 8(c) Temporary Cease/Desist; 8(e)(1) Removal & Prohibition; 8(e)(3) Temporary Suspension; 8(g) Suspension Order; 8(i) Civil Money Penalty (CMP). Formal enforcement actions are drawn up by legal.
What is strongest formal enforcement action?
Suspension or termination of deposit insurance
What is difference between Consent order and Cease and Desist Order in Formal Actions?
In Consent Order, Bank or IAP agrees to issues and waives right to hearing. Agrees to make changes. In Cease and Desist, bank does not stipulate and is ordered to make changes.
What is an IAP (in enforcement actions)?
Institution Affiliated Party––could be a director, employee, or someone associated with bank
When can Civil Money Penalties (CMP) be assessed?
Three sets of procedures for CMPs. HMDA\n\n\nFlood\n\n\nOther consumer compliance and fair lending violations\n\n\nCMPs can also be assessed against individuals (not common)
What drives MOU (Memorandum of Understanding) in Enforcement Action?
CMS (Compliance Management System)
Civil Money Penalty timeline after Regional/Washington Consultation and letter sent to bank?
15–day letter sent to bank. (Bank must respond within 15 days.) Letter usually gets sent with ROE.
When should Civil Money Penalties against Bank be considered?
Consumer harm or harm to institution\nSubstantial risk or causes harm to public confidence in the Bank\nWillful, flagrant, bad faith\nIAP or related interest received substantial benefit\nprevious supervisory actions not correct problem\nweakness in third party oversight\n*intentionally or repeatedly misreporting or failing to report GMI
What are CMP Matrix factors?
Consumer harm; intent; concealment; history of previous supervisory action; continuation after notification; duration of misconduct prior to notification or discovery; frequency of misconduct; financial gain and/or loss; previous misconduct or criticism; effectiveness of compliance program and internal controls\n\n\n(listed in order of importance)\nMitigating factors are restitution and cooperation.
What is reviewed for HMDA errors and refiling?
Line Error Rate (line over–reported [shouldn’t be included] or key data field error. Non key data field NOT included)\nKey Data Field Error Rate. 21 key data fields. Only lines with a key data field error are included in line error rate calculations\n*Omissions Error Rate Calculations (files omitted (originated and non–originated) but should have been on LAR)
HMDA Resubmission Guidance for Small Reporters (less than 100 reportable applications)––must refile when?
10%+ omissions; OR \n\n\n20% + line errors; OR\n\n\n10% plus in any one key data field in error.
HMDA Resubmission Guidance for Large Reporters (100+ files)––must refile when?
line error 10% or more; OR\nKey line error 5% or more; OR\nOmission rate 5% or more
How quickly must HMDA data be scrubbed and refiled?
Should be within 60 days.
Factors to consider in determining if HMDA CMPs should be assessed?
Levels of errors or omissions are SIGNIFICANTLY ABOVE threshold for resubmission AND\nViolations are EGREGIOUS––Repeated errors in sequential examinations, OR Intent to disregard HMDA. Such as intentionally misrepresenting mortgage activity or failing to comply with resubmit request. \n*For SMALL reporters, both egregious standards must be met.
What are considered significant error rates for HMDA?
20–30% Line Error Rate AND 2–3 Key data fields at 10% or higher; OR\n\n\nOmission error rate above 10%
Factors considered in determining amount of HMDA penalties?
CMPs may vary based on error rate, number of key data fields with high error rates or the proportion of file omissions;\nImpact on bank’s community and on aggregate disclosures;\n*Evidence of prompt corrective action.
CMPs for Flood Insurance––when are they mandatory?
CMP must be assessed when the bank has a pattern or practice of making, increasing, renewing, or extending loans in violation of flood act provisions. Includes force placed, notice
CMPs for Flood Insurance––when are they discretionary?
CMPs MAY be assessed for all other flood insurance violations that expose potential problems with bank’s compliance Management system. Such as failure to obtain flood determination form (could be problem with CMS) Section 8i.
When is there a pattern or practice for flood CMP?
Violations are repeated, intentional, regular, usual, or deliberate
Flood––how to determine number of violations?
Both open and closed (paid off) loans\nAll loans made, extended, renewed, or increased during previous FOUR YEARS from date of exam (4–year look–back period)\n*Imposed on per–violation basis.\nIf flood penalties at last exam, only look back to last exam. Statute of limitations may run out (4 years) so some loans may fall off by time reviewed for CMP, but may still have violation.
Flood––penalty amounts?
As of 7/6/2012––$2000 per violation under Biggert–Waters Reform Act.
Flood Tier 1 CMP penalty?
$100–$400 per violation when institution had no intent to violate the law; first time violations despite reasonable efforts and systems to ensure compliance; inadvertent errors.
Flood Tier 2 CMP penalty?
$401–$1000 per violation where bank acted with reckless conduct or willful disregard; repeat violations; first time offenses where violations are attributed to ineffective or deficient CMS; penalty at higher end of range when conduct is determined to be egregious. Could be second time violation.
Flood Tier 3 CMP Penalty?
$1001–$2000 per violation when conduct that institution knew would violate the law; deliberate strategy that violated the law resulting in consumer harm; violations at two or more previous exams; penalty at higher end of range when misconduct is egregious.
Flood Penalty Amount Considerations?
How are flood violations classified on violations page for ROE; \nDid violations expose bank or customers to potential vulnerability?\nWere violations cited at prior exams?\ndid practices result from MGMT negligence?\nviolations a record–keeping problem? Likely to recur? bank discover violations? Corrective action? \nadequate compliance resources for bank?
Flood––coverage amount?
Lesser of replacement value, loan balance, or Flood insurance ($250K residential; $500K commercail). Contents $100k residential; $500k commercial
How do flood and hazard insurance costs differ?
Flood includes foundation cost. Hazard insurance does not.
Flood––Condominium coverage?
\nLoan: $300K; Replacement: $10,000,000. RCBAP––$8M or $160K per unit (50 units). Insurable Value $200K per unit. If in Flood hazard area––$250K per unit. Take into consideration the RCBAP, and what that covers.Residential Condominium Association Policy. Replacement value of building & # of units in bldg. UNDERINSURED 250X50=10M. need to increase each policy by $40,000, to $200K each.
Flood: Loan $200K;Residential bldg: $245K; Garage––detached Storage bldg $20K. Flood zone.
Flood insurance required: $200K.
Flood: Loan Amount $400K. 2 residences: Residence 1––$350K. Residence 2––$150K. Flood insurance required?
Replacement cost $500K (add together). Maximum available $500K. Insurance required $400K (loan amount). Need two policies, split max between 2 policies.
Flood––High value land, crappy building?
If structure on it, and in flood zone, must obtain flood insurance for bldg. can get insurance just for tear down.
Flood––secondary lien position?
Balance of all loans considered for the loan amount. But dwelling can only have one policy, so policy would need to be increased (request of borrower) . Confirm multiple loans through title search.
When can you rely on a previous flood determination form?
within 7 years\nno known map revisions\n*prior determination made on SFHDF form
Flood: Commercial Loan amount: $200K; Warehouse $150K; Inventory––$100K, Flood insurance?
Insurable Value: $250K\nMaximum Insurance: $1M\nHow much required? $200K\nHow would you split insurance? Building $150K (start with building) and then $50K for contents\nInsurable value is determined by actual cash value (replacement value less depreciation)
Flood––bank loan on contents only?
Flood insurance NOT required for contents. If secured by building and contents, both required.
Flood––escrow requirement
If property in flood zone, must escrow but small bank exception if total assets less than $1billion as of 7–6–12 and not required to escrow and no bank policy requiring escrow of taxes/insurance. Other exceptions: Subordinate; condos; business or ag purpose; HELOCs; nonperforming loans; loans of 1 year or less.
Types of Overdraft programs?
*Automated (computerized program determines if NSF qualifies for OD coverage.\nLinked transfer account (contractual agreement between bank and customer. Customer’s transaction account linked to other bank accounts)\nOD LOC (contractual agreement between bank and customer––specified amount loaned to cover OD items. primarily Business accounts.
Formal OD program?
Automated, not necessarily shared with the customer. Examples: Ready Reserve, Linked Transfer Accounts; Bounce; Programs similar to Bounce but not known to customer. WITHOUT HUMAN INTERVENTION
Informal OD Program?
Ad Hoc: Management decides daily what overdrafts to cover and what fees to charge; these programs are discretionary and will likely be rare. WITH HUMAN INTERVENTION
Hybrid OD Program?
Any program that has facets of formal and informal (e.g., ATM card that account holder opted in but other ODs are handled on an ad hoc basis.
OD program and Reg DD Changes
Reg DD expands requirement to disclose OD fees on periodic statements to ALL institutions. \nAggregate fee info more effective and noticeable\nATM balances on ATM, internet, telephone to exclude available OD amounts\nPeriodic statement must contain info on OD fees and for year to date. \n*If disclosure through Automated systems––if one balance MAY NOT include OD funds. If two balances, second MAY include OD balance if prominently states balance includes OD
OD REG E CHANGES
starting 7/1/10––new account notice and consent must be provided prior to any fee being imposed. OPT IN.\nstarting 8/15/10––for existing accounts, banks cannot assess ATM or debit OD fees unless OPT IN.
OD Programs and Consumer Protection––Monitoring?
Monitoring for customer who overdraw more than 6 occasions where fee is charged in rolling twelve month period. contact and provide opportunity to choose less costly alternative.
OD workout program?
Discontinue OD program while customer is in loan workout program. TILA and REG Z––Must provide cost disclosures if credit is subject to finance charge and payable in four or more installments. REG B ECOA––Discretionary overrides happening for some customers but not others
UDAP––test for Deceptive practice?
Misleading\n\n\nFrom Perspective of reasonable consume\n\n\nMaterial representation, omission, or practice
UDAP––test for Unfair Practices ?
Causes or is likely to cause substantial injury\n\n\nCannot reasonably avoid injury\n\n\nInjury not outweighed by benefits\n\n\nViolates Public Policy
UDAP Applicability to whom?
Applies to both consumers and businesses
What Regulation governs UDAP?
Section 5 of FTC Act
UDAP––What are Section 5 standards for Unfair or Deceptive?
Information withheld or presented in a misleading manner that presented consumer from making an informed choice\n\n\nThe harm to consumer could not have been reasonably avoided
UDAP––what is Substantial Injury?
Usually involves monetary, economic, or other tangible harm\n\n\nExists if the practice does a small harm to a large number of people or it raises a significant risk of concrete harm\n\n\nDoes not usually include emotional injury\n\n\nDoes not typically involve trivial or speculative harm
UDAP––How can harm be reasonably avoided?
Consumers cannot reasonably avoid injury due to absence of material information\n\n\nUnreasonably takes advantage of ability to make a decision freely\n\n\nSubjects consumers to undue influence or coercion\nCreates or takes advantage of an obstacle to the free exercise of choice
UDAP––not outweighed by benefits?
The net effect of the act or practice must be injurious\n\n\nThe injury must not be outweighed by any offsetting consumer or competitive benefits from the act or practice
UDAP––Public Policy
Includes statute, regulation, or judicial decisions\n\n\nViolations, or affirmatively allowed acts or practices, may be considered as evidence of unfair\n\n\nNot the primary basis for the ultimate finding that an act or practice is unfair
UDAP––Misleads or Is Likely to Mislead?
Expressed or implied claims or promises and may be written or verbal\n\n\nOmitted information is necessary to prevent consumer from being misled\n\n\nCan mislead by what is stated as well as what’s not stated\n\n\nLayout or structure of the message may be misleading
UDAP––Reasonable Consumer
Consider: How target audience is expected to respond\n\n\nIf consumer’s expectations or interpretations are reasonable\n\n\nHow consumer considers the entire advertisement, transaction or course of dealing
UDAP––Material representation, omission or practice (for deceptive)?
Is likely to affect a choice or conduct\n\n\nIt relates to costs, benefits, or restrictions\n\n\nIt relates to express claims about financial products or services\n\n\nIt is intended that the consumer draw certain conclusions based upon the claim\n\n\nOmitted information is necessary to make a rational decision regarding a product or service
UDAP––what to consider for deceptive?
Prominence\nPresentation\nPlacement\nProximity
